The vulnerability wildcard and Kenneth Rogoff

April 5, 2011

Harvard economist Kenneth Rogoff gives yet another example of status quo thinking in his Financial Times article entitled “History will rue US and European Debt Woes”. The thrust of the article is the standard right wing condescension of public debt along with a defense of austerity and lower marginal tax rates. There’s no point in elaborating on these tired elitist views.

What I think is interesting is Rogoff’s assessment of vulnerability. He’s written previously about his fear of an “inequality wildcard” and the resulting “vulnerability” of the status quo but that was during the Egyptian revolt and I think he’s forgotten that angle. He now sees society as the “vulnerable” party because of its rising public debt.

We live in a world in which a relative handful of mega owners control virtually all productive resources while the vast majority are forced into a desperate struggle to maintain previously taken for granted living standards. Today’s sad neoliberal reality is one in which inequalities of wealth and income assure that widely shared prosperity is impossible without ever expanding private or public debt. Rogoff doesn’t concern himself with these facts, though, concluding only that:

It is going to take many years of determined effort and huge reform to close the gaping window of vulnerability out of which the US and Europe now find themselves staring.

In this, Rogoff misses the most important point by a gaping margin. It’s the height of absurdity to think society – humanity itself – can be truly vulnerable to a clique of financiers. US and European society are indeed vulnerable to rising debt: but only to the extent they choose to acquiesce to the system. There’s nothing in nature or physics that requires them to rely on a handful of individuals in order to live. Society is vulnerable only to the extent it so chooses and is therefore not really vulnerable at all; concentrated wealth on the other hand, with its undying lust for power, is absolutely vulnerable. Its party lasts only so long as society is willing to pay the tab and with ever fewer invitees, the clock is certainly ticking.

Rogoff is a former chess grand master and, with his bridge-like “vulnerabilities” and poker-like “wildcards”, seems to think in terms of games. In the game of global capitalism, the only hope he and his fellow wealth players have is for society to continue being blind to the fact it holds all the cards. Give him credit, though, for his gallant efforts at keeping it that way with all his false talk of vulnerabilities.

Appreciate the kind words Stephan. Agree with your post on your site regarding the FT comments section. It provides great nourishment for us blog posters. Rogoff, in particular, never fails to provide inspiration!